The Step-by-Step Guide and Cost for Electronically Filing Your Business Taxes

February 18, 2017

It’s your favorite time of year once again: tax time! If you’re still manually filing your taxes the old-school way (read: paper documents), it’s time to step into the new millennium and get electronic. You’ve got a ton of options that allow you to digitally file your taxes this time around.

Step 1: Understand the Benefits

The IRS can feel like a black hole, so what happens when you file your tax paperwork through the US Postal Service and the IRS never gets it? You end up sitting on the phone, on hold, for an hour. And then you have to file your paperwork all over again.

Either that, or you make a calculation mistake, and the IRS penalizes you for not being an accounting whiz.

But filing your taxes electronically removes the margin of error. The software calculates how much you owe in taxes, and your filing paperwork won’t get lost in the mail.

Step 2: Pick Your Poison

There are a surprising number of ways you can file your taxes electronically. Pick the one that makes the most sense for you and your business.

Work with a Tax Professional: This time of year, there’s someone dressed as the Statue of Liberty on every corner, beckoning you to just one of the many tax preparers who file taxes electronically. The benefit of hiring a professional company is that they know more about taxes than you do, and can help you take advantage of tax breaks you might not be aware of.

What it costs: The drawback is the fee: it can cost a few hundred dollars to get your taxes filed, depending on how complicated your situation is.

Buy Software: If you’re more DIY, you can buy access to TurboTax or similar software, which will walk you through filing your taxes by asking you a series of questions about your income and expenses. You don’t even need to buy a CD-ROM anymore: you can access your tax info directly from the website or mobile app. The drawback, if any, is that you don’t have a real, live tax person sitting in front of you, though customer support and FAQs may address any concerns you have.

What it costs: With TurboTax, there’s a Federal Free Edition, and the next plan starts at $54.99, making it affordable for any business owner.

E-File: If you don’t need to be walked through the process and just want to fill out the exact IRS forms in digital version, check out the IRS’s list of authorized IRS e-file providers. Whether you just want to fill out, say, Form 940, or you’re looking for additional tax-related services, these companies get the IRS seal of approval. The drawback is: filling out these documents digitally doesn’t ensure that your numbers are correct.

What it costs: Fees vary depending on provider.

Check out the Free File Alliance: Depending on your income, you might not even have to pay to e-file. The Free File Alliance provides free e-filing of federal tax returns for those with a yearly adjusted gross income of $62,000 or less.

What it costs: Nothing, if you qualify.

Step 3: Gather Your Documents

Hopefully you’ve been organized with your financial documents and can easily gather them now that it’s time to file your taxes. As a business owner, these documents will be the most helpful in filing your taxes, no matter which option you choose:

Your profit and loss statement

1099s if you are a contractor or freelancer

Your social security number or employer identification number

As you receive 1099s and other tax documents, put them in a folder marked – you guessed it – “Taxes” so that it’s easily accessible.

Step 4: Set Aside Time

If you’re filing your own taxes, allow plenty of time for it, and be aware of deadlines. If you run an S Corporation, your deadline for filing its taxes is March 15, though you still have until April 18 to file your personal taxes (as April 15 falls on a Saturday this year). Missing these deadlines could accrue you serious IRS fines, and you’re already paying enough in taxes, so don’t slip up and end up paying more because you didn’t plan ahead.

Step 5: Get a Payment Strategy

If you aren’t paying your estimated taxes quarterly, you’ll owe a hefty chunk when you file. If you need to, arrange a payment plan with the IRS (only eligible to those who owe $50,000 or less in taxes) and pay it out over time.

Step 6: Start Thinking About Next Year

Once you file last year’s taxes, you’ll be ready to take a break, but keep in mind: your taxes will be that much easier to file next year if you plan ahead. To that end, consider:

Paying estimated taxes quarterly

Hiring an accountant to organize your accounting records

Keeping receipts on hand

Starting the filing process earlier

Tax season is so much more bearable when you take advantage of e-filing. What tips do you have to reduce the headache?

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